No more special purpose financial statements for some not-for-profit entities

The Australian Accounting Standards Board (AASB) recently published AASB 2026-2 Amendments to Australian Accounting Standards - Extending the Application of the Conceptual Framework and Limiting the Ability of Not-for-Profit Entities to Prepare Special Purpose Financial Statements, which amends the Conceptual Framework, AASB 1057 Application of Australian Accounting Standards and AASB 1053 Application of Tiers of Australian Accounting Standards. The effect of these changes is to scrap special purpose financial statements (SPFS) for many private and public sector not-for-profit entities (NFPs) that are required to prepare financial statements in accordance with Australian Accounting Standards or ‘accounting standards’.

Which NFPs must prepare GPFS?

For annual reporting periods beginning on or after 1 July 2029, NFP public and private sector entities must prepare GPFS if they are required by:

  • Legislation to prepare financial statements in accordance with Australian Accounting Standards or ‘accounting standards’, or
  • Their constitutions or other documents to prepare financial statements in accordance with Australian Accounting Standards, provided that the relevant document was created or amended on or after 1 July 2029.

Legislation

(e.g. medium and large charities reporting under the Australian Charities and Not-for-profits Commission Act 2012)

 OR

Constitutions or other documents created or amended on or after 1 July 2029

Are SPFS ever permitted?

Yes. Similar to private sector for-profit entities following the reform in 2020, NFPs can continue to prepare SPFS if:

  • Legislation does not require them to prepare financial statements that comply with Australian Accounting Standards or ‘accounting standards’
  • Their constituting document or other document does not require them to prepare financial statements that comply with Australian Accounting Standards (for example, they can prepare financial statements that comply with ‘accounting standards or other ‘GAAP’), or
  • Their constituting document or other document does require them to prepare financial statements that comply with Australian Accounting Standards, but the constituting document or other document was created before 1 July 2029 and has not been amended since that date.

In such cases, SPFS will be prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards as specified in the Basis of Preparation note. However, additional disclosures will be required under AASB 1054 Additional Australian Disclosures by private sector NFPs that are required by their constituting document or other document to prepare financial statements that comply with Australian Accounting Standards, but the constituting document or other document was created before 1 July 2029, and has not been amended since that date (refer to paragraphs 9A and 9B of AASB 1054).

What type of GPFS?

AASB 1053 sets out the overall requirements for GPFS as follows:

Tier

Type of Accounting Standards to be applied

Which entities can apply?

Tier 1

Australian Accounting Standards
  • For-profit private sector entities with public accountability
  • The Australian Government and State and Territory Governments

Tier 2

Australian Accounting Standards – Simplified Disclosures
  • For-profit private sector entities that do not have public accountability
  • NFP private sector entities that do not apply the Tier 3 reporting requirements, and
  • Public sector entities – both for-profit and NFP – other than the Australian Government and State and Territory Governments

Tier 3

Australian Accounting Standards – Simplified Accounting
  • NFP private sector entities that do not have public accountability and are not prohibited from applying the Tier 3 reporting requirements by legislation or their constituting document

Note that Tier 3 comprises simplified recognition, measurement, presentation and disclosure requirements for Tier 3 entities, set out in AASB 1061 General Purpose Financial Statements – Not-for-Profit Private Sector Tier 3 Entities.

Which type of GPFS is required for NFPs?

Tier 3 is available only to private sector NFPs. Therefore:

  • Public sector NFPs must apply Tier 2 as a minimum, or even Tier 1 if required
  • Private sector NFPs can apply Tier 3 if they do not have public accountability and are not prohibited from applying the Tier 3 reporting requirements by legislation or their constituting document
  • If private sector NFPs are not eligible to apply Tier 3, they must apply Tier 2 or Tier 1 as appropriate.

Private sector NFPs required to prepare financial statements applying Australian Accounting Standards by legislation (e.g. for ACNC large and medium-sized charities) will have to prepare GPFS. Depending on thresholds set by the applicable legislation for entities within the remit of the Australian Charities and Not-for-profits Commission (ACNC) or other legislators and regulators, these may be able to be prepared in accordance with a simplified Tier 3 recording, measurement, presentation and disclosure requirements of AASB 1061 General Purpose Financial Statements – Not-for-Profit Private Sector Tier 3 Entities.

Where to from here?

Public sector NFPs that currently prepare SPFS will have to prepare GPFS in future. This applies if the financial statements are required by:

  • Legislation to be prepared in accordance with Australian Accounting Standards or ‘accounting standards’, or
  • Their constitutions or other documents to prepare financial statements in accordance with Australian Accounting Standards, provided that the relevant document was created or amended on or after 1 July 2029.

As Tier 3 applies only to private sector NFPs, these GPFS must be either Tier 1 or Tier 2, as appropriate.

Private sector NFPs currently preparing SPFS will also be required to report under Tier 1, Tier 2 or Tier 3 GPFS if they meet the criteria as noted above for public sector NFPs.

AASB 2026-2 provides transitional relief to NFPs preparing Tier 2 GPFS for the first time and AASB 1061 contains transitional relief for private sector NFPs preparing Tier 3 GPFS for the first time.

We are here to help

Whilst the Tier 3 Standard simplifies the requirements for eligible entities, navigating the financial reporting framework for NFPs is currently a complex exercise, and is likely to become more so when the new GPFS requirements kick in in 2029. Also, the transition effort required to move from SPFS to a form of GPFS should not be under-estimated. Please contact our IFRS & Corporate Reporting team if you need help deciphering the new standards.